As the bus crept into this quiet town in the foothills of the Himalayas, Tsultrin Lhamo finally felt free. For the 20-year-old Tibetan fleeing a homeland under Chinese rule, her arrival in the Dalai Lama’s adopted hometown in India marked the end of a treacherous overland journey and, she hoped, the start of a new life.

China’s growing crackdown on religious freedoms, from the imprisonment of Tibetans possessing portraits of their spiritual leader to the ironfisted control of monasteries by Chinese armed forces, had made life too difficult to stay behind, she says. Like those before her, she paid a Nepalese guide to lead her through the mountainous terrain that connects western China to its neighbor, Nepal. With help from UNHCR, the U.N.’s refugee agency, she secured safe passage from Kathmandu to India. It was a grueling journey that spanned four months and three countries. She traveled on foot, took shelter in trees and dodged Chinese and Nepalese patrols. Still, she considers herself lucky. “So many people are desperate to leave Tibet,” she says. “But it has become almost impossible now.”

Since the Dalai Lama fled in 1959, Nepal has played a critical role for the Tibetan exile community, providing safe haven and a passageway to India. But in recent years, Nepal’s hospitality has waned — and the reason, many say, is China’s growing influence on the country’s political elite. Since 2008, when an uprising convulsed Lhasa shortly before the Beijing Olympics and was violently suppressed by Chinese authorities, the number of Tibetans making the journey to India has plummeted. From the early 1990s until 2007, some 2,500 Tibetans were arriving in India each year. In 2008, that number dropped to under 600, and has since hovered at about 800 refugees per year. A key reason, observers say, is that China has significantly tightened security, not only inside Tibet but also along the border with Nepal, choking off crucial escape routes.

But China’s strategy for containing Tibet’s fight for greater independence is no longer restricted to soldiers and sleuths on its own soil. With an eye on curbing what it calls “anti-China activities,” Beijing has in recent years enlisted the support of its small but strategically important neighbor, Nepal, which hosts an estimated 20,000 Tibetan refugees and serves as a crucial transit path for those traveling to India. According to a confidential U.S. embassy cable revealed by WikiLeaks in 2010, “Beijing has asked Kathmandu to step up patrols … and make it more difficult for Tibetans to enter Nepal.” Another cable reads that China “rewards [Nepalese forces] by providing financial incentives to officers who hand over Tibetans attempting to exit China.”

Indeed, “border management” and “information sharing” have emerged as key areas of collaboration between the two states, with some reports claiming Nepalese police receive training and equipment from the Chinese. Anecdotal evidence also points to a Chinese security presence on the Nepalese side of the border. Earlier this year, CNN journalists filming in Nepal were intercepted by Chinese-speaking men in plainclothes, who prevented them from using their cameras before following them deep into Nepalese territory.

China’s growing influence in Nepal has alarmed Tibetan activists and officials, who have long viewed Kathmandu as a sanctuary and an ally. Under an informal agreement made in 1989 between the Nepalese and the U.N. refugee agency, Nepal pledged to allow fleeing Tibetans to pass safely to India. Now, Tibetans say, that trust is eroding. “Nepal is obliging every demand China makes,” says Thinley Gyatso, a secretary in the Tibetan government-in-exile’s Finance Department who spent several years living in the Himalayan nation. Though there are still only a few documented cases of Nepal repatriating Tibetan refugees — including a case in 2010 in which three Tibetans were forcefully returned to China — information about dealings between security forces near the border remains scarce. A recent account in the New Yorker says Nepalese police have been “apprehending Tibetans far inside Nepal, robbing them, and then returning them to Tibet at gunpoint, where they are typically imprisoned and not uncommonly tortured by the Chinese.”

In return for its cooperation, Nepal, an impoverished nation of 30 million people, which for years relied heavily on aid, trade and investment from India, has found a new benefactor. On a visit to Kathmandu in March last year, China’s army chief Chen Bingde pledged $20 million in military aid. This year, which Beijing has dubbed a “year of friendly exchanges” between China and Nepal, began with a visit by the Chinese Premier Wen Jiabao, who offered $119 million in aid. China has also promised assistance and technology for constructing a “dry port” in Tatopani near the border with Tibet, and in April, a Nepalese parliamentary panel cleared the way for a Chinese company to build a $1.6 billion hydroelectric plant in the Himalayan country.

China’s foray in Nepal appears to be a classic example of the Asian giant’s much-touted checkbook diplomacy, a strategy Beijing has employed across the globe to expand its influence by opening up seemingly endless pipelines of aid and investment. But China’s diplomatic push in Nepal over the past few years takes this tack a step further, says Robbie Barnett, director of Columbia University’s Modern Tibetan Studies Program. “In many respects, China now determines Nepal’s local and foreign policy,” he says.

Eager to appease China, Nepal is distancing itself from Tibetan refugees, many of whom have lived in Nepal for decades. According to a report by the International Campaign for Tibet to be released later this month, Beijing has “sought to delegitimize the Tibetan community in Nepal.” Since 1998, when the Nepalese stopped issuing refugee identity certificates, many young Tibetans who’ve spent their lives in Nepal have become effectively stateless, unable to attend schools or apply for jobs, and are exposed to exploitation and even deportation. In 2010, Nepalese authorities confiscated hundreds of ballot boxes during the prime-ministerial elections held by Tibet’s exiled government, which is headquartered in Dharamsala, India. Last year, Tibetans in Nepal commemorating the 52nd anniversary of the Tibetan revolt, were violently dispersed by Nepalese police; the police cracked down on Tibetan protesters this year too.

The situation is exacerbated by Nepal’s messy political landscape, where the long transition from a Hindu monarchy to a secular, democratic republic drags haltingly along. The country suffered a decadelong Maoist rebellion that ended in 2006 when the Maoists agreed to join the political process. But since then, political consensus has remained elusive and the country still doesn’t have a constitution. The future of many Tibetans, laments Gyatso, now depends on stability in Nepal. For the hundreds wanting to leave Tibet and the thousands already in Nepal, that is not a promising thought.